After buying ShoreBank and struggling to keep afloat for eight years, the investors of Urban Partnership Bank in Chicago have sold the institution that focused on funding development in neglected neighborhoods.

“We bought $1.3 billion of failed assets from the old ShoreBank, and entered into the FDIC’s ‘loss share’ program. Quite frankly, after climbing through a billion dollars of restructuring, eight years later, what Urban Partnership thought it was going to be in terms of size has been greatly reduced,” Urban Partnership’s President/CEO Darrell Hubbard told the Chicago Sun-Times in an interview Wednesday.

The bank, with some $450 million in assets at four area branches — in Bronzeville, Chatham, Greater Grand Crossing and Bellwood — and a branch in Detroit, has been acquired by south suburban-based Providence Bank & Trust, which has $630 million in assets, officials announced Thursday.

But while Urban Partnership will be no more, its mission will continue.

The 14-year-old Providence Bank, with 12 branches in Chicago suburbs and Northwest Indiana, is a stewardship-based bank — founded on a corporate principle of donating 10 percent of its profits to civic, nonprofit and Christian organizations in the areas it serves.

“That arose out of the principles of the seven individuals who organized our bank. That’s the principle they practiced in their businesses and in their personal lives, so we wrote it into our offering documents, and our shareholders invested with that principle,” Providence Bank’s President/CEO Steve VanDrunen said.

“And we have been doing that since the beginning. In the first years, we lost money, but we gave anyways. But as the earnings started to build, we have been setting it aside as one of our line item expenses every month, with over $3 million donated since inception,” VanDrunen said.

Providence will maintain the four Urban Partnership branches. Urban Partnership, which has two Chatham sites — a 41,000-square-feet facility and small motor bank at 79th & Cottage Grove — will sell the former, with Providence maintaining the latter.

Steve VanDrunen (L), is President/CEO of the 14-year-old Providence Bank & Trust, which has $630 million in assets. Darrell Hubbard is President/CEO of the 8-year-old Urban Partnership Bank, which has $450 million in assets. Urban Partnership has been acquired by Providence. | Maudlyne Ihejirika/Sun-Times

It’s the latest saga in the history of the original ShoreBank, which was founded in 1973 and failed in 2010, after 37 years of helping home and business owners in beleaguered South and West Side communities who couldn’t otherwise have obtained financing.

At the time of its failing, ShoreBank was the nation’s oldest and largest community development bank, with reverberations nationwide, and the 118th seized by federal and state regulators nationally in the savings and loan crisis.

By the time it was acquired by Urban Partnership, the federal government was ending the President George W. Bush-initiated Troubled Asset Relief Program of bank bailouts, known as TARP, requiring banks eat a share of the losses.

“For the most part, you’ll see major banks only have about 5 percent of ‘loss share’ assets. But when you have 100 percent that’s ‘loss share,’ as we did, that’s a problem. Half of our bank was doing work-out on the purchased assets from ShoreBank, and the other half was doing loan origination, two separate little worlds going on,” said Hubbard.

“Eight years later, we’re down to $130 million of those ‘loss share’ assets. With the realization that the bank was shrinking, and with regulatory requirements being what they are in terms of cost and overhead, we realized we were just getting very limited in the amount we could get going into our mission,” Hubbard said.

“Our strategy was, ‘OK. We’re smaller. We need to get larger. But we also needed to find a partner aligned with our mission. Providence’s stewardship program, and the fact that they knew our areas and weren’t coming in to just slash and burn, but actually wanted to commit to the low- and moderate-income areas we serve, was a perfect partnership.”

Pending regulatory approval, the two bankers expect Providence’s acquisition of Urban Partnership — a Community Development Financial Institution (CDFI) and Minority Depository Institution (MDI) — to close first quarter 2019. The deal will mean job losses for some of Urban Partnership’s 115 employees, but numbers have yet to be determined.

Providence had long sought entry into the Chicago market. It had been in talks with three black-owned banks before they failed in recent years: Highland Community Bank, in 2015; Illinois Service Federal Savings & Loan in 2016; and Seaway Bank, in 2017.

“We have actively looked. In this discussion, all the pieces that you need to have come together, did” said VanDrunen. “We see opportunity in the communities that we’re going into. We have networks, including African-American networks, that we feel would be leveraged by having physical locations in these communities, as well. We’re hopeful that we can go forward.”